Julia Gillard becomes prime minister

Julia Gillard has been sworn in as Australia's first female prime minister after Kevin Rudd stood aside instead of facing a leadership ballot.

Speaking to the media, Ms Gillard said she accepted the Labor leadership with humility, resolve and enthusiasm — and announced advertisements about the government's mining resources tax would be cancelled.

"I'm utterly committed to the service of this nation," she said.

"I will lead a strong and responsible government that will take control of our future."

Ms Gillard acknowleged she had not been elected prime minister by the Australian people and pledged to hold an election in coming months.

"I believe in a government that rewards those who work the hardest, not those who complain the loudest — the people who play by rules, set their alarms early, stand by their neighbours and love their country," she said.

"I will lead a strong and responsible government that will take control."

Wayne Swan will become deputy prime minister after an uncontested ballot, as well as keeping his current job as treasurer.

BHP announced it would stop its anti-resources tax advertisements after a plea from Ms Gillard. The company said it was "encouraged" by Ms Gillard's commitment.

In a teary concession speech full of awkward pauses, Mr Rudd spoke of some of his government's highlights in the last two-and-a-half years, including the apology to the stolen generations and ratifying the Kyoto Protocol.

He also highlighted the work that he has done for the homeless and the hospital system including opening regional cancer care centres and creating an organ transplant authority.

Mr Rudd listed the apology to the stolen generation, keeping the country out of the global financial crisis and the education revolution as some of the achievements he was most proud of.

"I was elected by the Australian people as Prime Minister to bring back a fair go for all Australians, and I have given my absolute best to do that — I have given my absolute all," he said.

"I hope I've been able to demonstrate to you that this has been a very busy two and a half years."

Mr Rudd decided not to take part in a leadership ballot rather than face a defeat in the Labor party room shortly after 9am this morning.

Ms Gillard's father John said he was incredibly proud and excited to see his daughter become prime minister.

"I knew that Julia would be a formidable performer, but to rise to the highest office in the land was never in the forefront of my mind," he said.

"I think she'll be a prime minister that will build a fair and decent society for Australians, that she'll be a team player and hopefully unite the party behind her and face the election whenever it comes."

Ms Gillard's challenge to Mr Rudd came after the Australian Workers' Union withdrew its support and a group of young turk MPs threw a rocket under his prime ministership.

The drama is believed to have begun on Wednesday morning when NSW powerbroker Mark Arbib, Victorians Bill Shorten and Dave Feeney, and South Australian Don Farrell visited Ms Gillard to tell her they had lost confidence in the prime minister.